Legacy Housing(US:LEGH)2023-05-10 19:44Financial Data and Key Metrics Changes - Product revenue decreased to $43.3 million, a decline of 16.4% in Q1 2023 compared to Q1 2022, primarily due to reduced shipments across all three plants [10] - Net income increased by 1.1% to $16.3 million in Q1 2023 compared to Q1 2022, with basic earnings per share growing by $0.01, an increase of 1% [15] - Other revenue, consisting mainly of dealer financed fees and commercial lease rents, increased to $1.8 million, a rise of 33.3% year-over-year [14] - Consumer and MHP loan interest income rose to $7.7 million, an increase of 13.9% compared to the same period in 2022 [22] - Selling, general, and administrative expenses decreased by $2.3 million, or 29.3%, due to reduced salaries and legal expenses [24] - The company achieved an 18.7% return on equity over the last 12 months, with a book value per basic share of $16.32, up 20.3% from the previous year [25] Business Line Data and Key Metrics Changes - The manufactured housing industry has slowed, with March 2023 shipments up from February but still below 2022 levels; however, the company believes it has fared better than most competitors [21] - The company has a healthy backlog at all plants, indicating a strong sales push despite overall industry slowdowns [21] Market Data and Key Metrics Changes - The company noted that over 50% of households in the U.S. earn less than $75,000, which aligns with its target customer base, suggesting potential for increased demand as housing affordability worsens [18] - The company has observed a significant rise in mortgage rates and tightened underwriting standards, which may impact consumer purchasing behavior [18] Company Strategy and Development Direction - The company is focused on maintaining pricing while reducing raw material inventory and managing costs effectively [26] - Management is optimistic about growth opportunities in the industry, particularly as housing affordability issues persist [12][27] - The company is exploring land development opportunities and partnerships to enhance its business model and generate recurring revenue [100] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the slowing demand but expressed confidence in maintaining plant utilization and securing large orders [18] - The company plans to continue operating conservatively while being opportunistic in capital deployment, particularly in financing and land development [95][100] - Management emphasized the importance of improving sales, inventory management, and cost control to enhance margins [81] Other Important Information - The company ended Q1 2023 with $3.2 million in cash and $7.8 million drawn on its line of credit, alongside $8.5 million in treasuries yielding approximately 4.7% [26] - Management has no current plans for a larger transaction or sale of the company, focusing instead on long-term growth [92][95] Q&A Session Summary Question: Can you discuss the macro environment affecting the industry? - Management noted a significant rise in mortgage rates and slowing demand for new home construction, but expressed confidence in maintaining plant utilization and potential demand increases as affordability worsens [18] Question: What is the status of your land development activities? - The company is actively pursuing land development opportunities and is open to partnerships, with a focus on creating a replicable business model that generates recurring income [100] Question: How do you plan to manage pricing in the current competitive environment? - Management stated they have held pricing steady and are offering financing specials to maintain sales without sacrificing margins [55] Question: What is the outlook for interest income moving forward? - Interest income is expected to move directionally higher as the company deploys capital into loan portfolios [74] Question: Can you provide an update on inventory levels? - Management indicated that raw material inventory is around $17 million, with excess inventory across company-owned dealerships, and they are focused on improving inventory turnover [40] Question: What is the long-term strategy for the business? - The company aims to continue growing and generating predictable returns, with no plans for a sale, focusing on operational improvements and capital deployment opportunities [92][95]